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The report attempts to demystify bond markets and clarify a general misapprehension among investors and regulators about how these overwhelmingly wholesale, off-exchange markets operate. Its publication comes at a particularly critical time – prior to the Commission’s upcoming, mandated review of the MiFID transparency requirements and their possible applicability to non-equity markets.
Bond markets play a crucial role in the economy through the capital allocation process, monetary policy decisions and the hedging of risk. It is curious, therefore, that these non-equity financial markets traditionally receive less attention from ordinary investors and the media in Europe, relative to their size, than equity markets.
The authors conclude that they urge measured and deliberate action on the part of regulators as they embark on the MiFID Art. 65 review, because it is by no means clear that transparency is the best policy instrument to address either of these concerns.